What’s the story with affordable housing?

The lack of affordable housing has been an ongoing problem for years, but what is it and why is it so important?

Affordable housing has been one of the buzzwords of the last decade, with politicians of all stripes promising to increase the levels of it, whole generations bemoaning the lack of it, and charities and campaign groups complaining that not enough is being done to make homes ‘genuinely’ affordable.

But what is affordable housing, why is it so important, and what are the potential problems with it?

No fixed definition

The main problem with affordable housing is lots of people have a slightly different idea of what it is. The definition is very subjective and changes from place to place, person to person and region to region.

While the government’s definition of affordable renting is fairly clear (affordable homes should cost no more than 80% of the average local market rent), when it comes to home ownership the definition is far more open to interpretation.

It says that affordable housing must be provided at a level at which the mortgage payments on the property should be more than would be paid in rent on council housing, but below market levels – which covers an exceptionally broad range and is far from clear-cut.

For some, affordable homes might be £80,000, for others £150,000 or £250,000. Clearly, this will also vary by region, with affordable homes likely to be far more expensive in London than they are in, say, Stockton-on-Tees or Sunderland.

A clearer outline

As mentioned above, the definitions surrounding affordable or social rented housing are much clearer, provided ‘to eligible households whose needs are not met by the market’. What’s more, eligibility is judged on local incomes and local house prices.

Affordable rented housing also includes provisions to remain ‘at an affordable price for future eligible households or for the subsidy to be recycled for alternative affordable housing provision’.

Social rented housing and affordable rented housing are both let by local authorities or private registered providers, with rent controls or ‘guideline target rents’ in place to ensure housing remains affordable.

There is also what is known as intermediate housing – properties for sale and rent provided at a cost above social rent but below market value. This can include shared equity homes such as those included in the government’s Help to Buy and Shared Ownership schemes.

Government initiatives

For a number of years now, politicians have placed a great deal of importance on affordable housing, with various schemes put in place to support those looking to buy a home for the first time.

This has included a number of flagship policies, such as Help to Buy (introduced by the Coalition in 2013) and Shared Ownership. Even further back, Right to Buy was introduced by Margaret Thatcher’s Conservative government in 1980 – allowing council and housing association tenants to purchase the home they lived in at a large discount. It still exists in England, with eligible council and housing association tenants able to buy their home with a discount of up to £104,900 in London and £78,600 outside the capital.

In the 2015 general election, meanwhile, a major part of David Cameron’s campaign was the promise of thousands of affordable starter homes, with £1.2 billion pledged over five years to make this a reality. As of now, the scheme hasn’t yet started, but aspiring homeowners can register their interest.

Why does it matter?

Housing – and more specifically affordable housing – is a very important topic for many people, in particular those from the younger generations who are often bracketed as millenials or Generation Rent.

The ability to buy a home without putting yourself in debt, relying on the Bank of Mum and Dad or spending years saving for a deposit is an aspiration for many – but the cold, hard truth of the matter is that it is now much more difficult to buy a home than it was twenty or thirty years ago.

Frustration over the sheer expense involved with a property purchase – and the fact that average property prices have raced ahead of wages in recent years – means affordable housing has become a hot topic of debate and a regular feature on the news agenda.

Shelter, which has been one of the most vocal campaigners for more affordable housing in Britain, says there should be a definition of affordability for all people, regardless of their age, income or living circumstances – with the charity suggesting that affordable housing should cost no more than 35% of a household income after tax and benefits.

What are the problems with a definition of affordability?

Well, a single definition of what constitutes affordable housing fails to take into account the different circumstances of different people. For example, a larger, richer household will be able to afford more than a household with a lower income.

Equally, a single person living in a flat may have more wriggle room when it comes to disposable income than a two-parent family with three or four children.

It also fails to take into account massive regional differences. The UK is not one easily defined homogenous mass – things are very different, worlds apart in fact, in the North West compared to the South East, or Wales and East Anglia. Even in cities themselves, there are areas of great affluence sitting astride areas which are much more deprived.

Whether you can afford a home will depend hugely on where you happen to live. If you live in an upmarket part of London, for example, you could easily be paying prices that are 20 times or greater than the median annual gross salary. Conversely, if you happen to reside in Burnley – one of the most affordable locations in the UK – you will require a much lower income and deposit to purchase a home.

House prices differ greatly across the country, as do average salaries and personal circumstances, so attempting to nail down a definition of affordable housing is certainly problematic.

Despite that, it will remain a key issue for voters, politicians and campaigners in the coming years – even though affordable housing will continue to be highly subjective.